SINGAPORE (BLOOMBERG) - Singapore's recent unwinding of some property curbs, which initially appeared to boost prospects for developers, may instead be creating new problems.

After regulators closed a tax loophole that allowed developers to offload apartments in bulk to institutional investors and wealthy Singaporeans, many of the city's builders now face an unpalatable choice: discount unsold luxury homes or pay stiff penalties for missing government-mandated sales deadlines.

Opting for discounts could push home prices even lower, prolonging a three-year slide in property values. The alternative could be even more costly. About 2,098 homes remain unsold in 57 projects and penalties on these could total about S$647 million this year, according to industry estimates based on official data.

"This could incentivise them to give greater discounts to buyers who have been waiting on the sidelines for further price corrections," said Ms Christine Li, director of research at Cushman & Wakefield in Singapore. "Paying the penalties will still be the last resort," she said, adding that weaker developers might give steeper discounts while major ones hold out.

The South-east Asian nation, which has one of the highest rates of home ownership in the world, also has among the most stringent regulations. Under rules aimed at preventing land hoarding, all developers with non-Singaporean shareholders or directors are required to complete construction of projects and obtain a Temporary Occupation Permit within five years of acquiring land. They have another two years to sell the apartments or face fines. Since December 2011, developers have been given a five-year deadline to sell all units in a development or pay at least 10 per cent of the land price as a penalty.

One way around that was the bulk sale of apartments via a share transfer to big investors, who pay lower a stamp duty than individual buyers. With the latest rule changes last month, that loophole has been shut by equalising the tax rates.

The tax advantage, and a 20 per cent decline in luxury home prices since the start of 2013, helped buyers such as Blackstone Group and wealth investors cherry-pick prime properties.

Blackstone has bought a 10-story apartment block and 18 units in Singapore's prime residential district since 2014. CapitaLand, Singapore's largest listed developer, in January sold 45 units at The Nassim, a luxury condo development near the Orchard Road shopping strip to Wee Cho Yaw, the city-state's second-richest man. City Developments, the country's second-largest developer, sold its Nouvel 18 project to a group of wealthy Singaporean investors through a S$977.6 million financing deal last year.

Singapore on March 10 announced an easing of some property restrictions after home price declines since 2013 made homes more affordable in the city-state. The move spurred a sharp rally in shares of Singapore developers on optimism prices would recover.

Since then, the initial euphoria has faded. CapitaLand, which surged 3.6 per cent the day the curbs were eased, has since declined 0.5 per cent. City Developments, which jumped 9.3 per cent in the two days following the announcement, has since dropped 2.6 per cent. Wing Tai Holdings Ltd jumped 8.1 per cent on the day and has fallen 1.8 per cent.

The government should give developers more time to sell units, and rules related to foreigners holding stakes in property developers should be changed, CapitaLand's Singapore chief executive officer Wen Khai Meng said last month.

Top Global chairman Sukmawati Widjaja offered to buy the remaining shares in the company, which has a market value of S$106 million, citing the potential penalties on unsold apartments.

Listed below are some of the projects with the largest proportion of unsold units which may be subject to penalties if they do not meet sales deadlines:

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